Buyers’ interest in U.S. foreclosures peaks just as inventory wanes

Buyers’ interest in purchasing foreclosed properties increased 158 percent over the past two and a half years, according to a survey cited by Bloomberg News. But at the same time the supply of such properties is plummeting, CNBC said, which is leading to weakening sales contracts, especially in the west and the south, regions where foreclosures are especially prominent. The National Association of Realtors reported today that pending home sales in the United States declined by 5.5 percent, led by a 12 percent drop in the west and seven percent drop in the south.

While the demand for foreclosed properties crescendos — found that 65 percent of buyers say they’re likely to purchase a foreclosed home this month, compared to 25 percent in October 2009 — banks are working harder to modify loans as part of the $25 billion foreclosure settlement, thereby reducing supply and the national sales volume.

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“The increasing problem is on the shortage of inventory,” said Lawrence Yun, chief economist for the NAR. “The demand is there, but if someone blinks they’re losing out on the contract signing.”

But the lack of a stigma associated with foreclosed homes could prove useful for states that use a judicial process, including New York, where the relative supply of foreclosed homes is actually increasing, The Real Deal reported today.

Though investors looking to capitalize on rising rents have few remaining choices, CNBC identified the five most lucrative markets for foreclosure purchases. It’s not surprise that Kansas City topped the list, but it comes as a bit of a shock that based on the discount distressed buyers can score in Boston and San Francisco, and the high rents those cities command, they placed second and fifth, respecitvely, on the list. [Bloomberg], [CNBC] and [CNBC]